Excerpt:.....premature.;(b) mortgage - improvements & new construction made--liable to pay 9% interest on cost of improvements.;by the terms of the mortgage deed the mortagee was not liable to account for the enhanced income. there is no evidence to show as to whether the improvments and new constructions had yielded any rents or profits to the mortgaged. then again it must be borne in mind that the mortgagee had not got possession of the mortgaged property till it was partitioned by a decree of the court. taking all these circumstances into consideration it would be proper to relieve the mortgagor of the term regarding interest on improvement to this extent only that he would be liable to pay interest on the cost of improvements at 9% per annum. - section 2(k), 2(1), 7 & 40 & juvenile justice..........as expenses for the partition suit incurred by the original mortgagee ummedmal, rs. 7901/5/6 as cost of improvements, rs. 10373/15/6 as interest on the cost of improvments at 6/- per annum and rs. 777/8/- as cost of the suit awarded to the defendants nos. 1 to 3. thus the plaintiffs were directed to pay in all rs. 33.052/13/- for redemption of the property in dispute.5. aggrieved by the judgment and decree by the trial court the plaintiffs and defendants nos. 1 to 3 (who will hereinafter be described as defendants) filed appeals in the court of district judge, ajmer. the plaintiffs' appeal was registered as civil appeal no 366 of 1963, and that of the defendant was registered as civil appeal no. 337 of 1963. as already stated above, both these appeals were disposed by the learned.....

Judgment:

C.M. Lodha, J.

1. There are two connected appeals filed against the single judgment and decree by the District Judge, Ajmer dated 15 3 1965 in Civil Appellate Nos. 337 and 366 of 1965 arising out of a suit for redemption of mortgage.

2. On 9-3-1908 one Brij Mohanlal mortgaged, undivided 1/4th share belonging to him in the house in question situated in the city of Ajmer with Dewan Bahadur Ummedmal, ancestor of defendants Nos. 4 and 5 Sobhagmal and Sampat Mai for a sum of Rs. 10 000/-. On 2-12-1918 Brij Mohanlal sold away the equity of redemption in the mortgaged property to one Suwalal who was the owner of the rest of the 3/4th share in the house. Defendant No. 4 Sobhagmal filed a suit for partition and possession of 1/4 share in the house against Suwalal and others in the Court of Sub-Judge. First Class, Ajmer and obtained a preliminary decree on 20 12-1928 vide Ex. A. 2. This decree was confirmed in appeal by the Tudicial Commissioner, Ajmer-Merwara by his judgment dated 25-9-1932. On 31-7-1958 the defendants Nos. 4 and 5 sold away their mortgaged rights to defendants Nos. 1 to 3 Motilal, Gulabchand, and Hiralal and put them in possession of the 1/4th share in the house which the defendants Nos. 4 and 5 had obtained by partition by metes and bounds. The plaintiffs Jeetmal and Shiv Prasad purchased the equity of redemption in respect of the disputed property from Suwalal, transferee from the original mortgagor Brij Mohanlal vide sale deed Ex. 1 dated 10-9-1958. On 14-10-1958 Jeetmal and Shiv Prasad filed the present suit in the Court of Civil Judge, Ajmer for possession of the property in dispute by redemption on payment of Rs. 10,000/-.

3. The defendants Nos. 1 to 3 admitted the alleged mortgage by Brijmohanlal, and the subsequent transfer of equity of redemption and the mortgage right by the persons concerned but contended that the suit is premature as it had been filed before the expiry of 100 years which was the term fixed in the mortgage deed Ex. 2, They pleaded in the alternative that the mortgagees had spent Rs. 7901/5/6 on improvements over the mortgaged property and therefore besides the mortgage amount they were entitled to get Rs. 7901/5/6 together with interest at 12 % per annum as stipulated in the mortgage deed. It was also pleaded by them that the original mortgagee Dewan Bahadur Ummedmal had filed a suit for partition and possession of 1/4th share of the mortgagor in the house in question and consequently they were entitled to get Rs. 4000/- as costs of this litigation along with interest there on at 12% per annum. The defendants Nos. 4 and 5 namely Sobhagmal and Sampat Mal filed a separate written statement supporting the claim put forth by defendants Nos. 1 to 3.

4. After recording the evidence produced by the parties the learned Civil Judge, Ajmer by his judgment dated 13-9-1963 granted a preliminary decree for redemption in favour of the plaintiffs declaring that the plaintiffs shall be entitled to redeem the property in question on payment of Rs. 10,000/- as mortgage money, Rs. 4000/- as expenses for the partition suit incurred by the original mortgagee Ummedmal, Rs. 7901/5/6 as cost of improvements, Rs. 10373/15/6 as interest on the cost of improvments at 6/- per annum and Rs. 777/8/- as cost of the suit awarded to the defendants Nos. 1 to 3. Thus the plaintiffs were directed to pay in all Rs. 33.052/13/- for redemption of the property in dispute.

5. Aggrieved by the judgment and decree by the trial court the plaintiffs and defendants Nos. 1 to 3 (who will hereinafter be described as defendants) filed appeals in the court of District Judge, Ajmer. The plaintiffs' appeal was registered as Civil Appeal No 366 of 1963, and that of the defendant was registered as Civil appeal No. 337 of 1963. As already stated above, both these appeals were disposed by the learned District Judge by a single judgment whereby he affirmed the judgment & decree by the trial court & dismissed both the appeals. Consequently, the plaintiffs & defendants have both filed second-appeals to this Court.

6. The plaintiffs, appeal has been registered as Second Appeal No. 380 of 1965, and that of the defendants has been registered as Second Appeal No. 197 of 1965.

7. I will first take up the defendants' second appeal No. 197 of 1965. Earned Counsel for the defendants has urged that the courts below have committed an error of law in coming to the conclusion that the terms of 100 years fixed in the mortgage deed is in the nature of a clog on the equity of redemption. It is urged that there is absolutely no evidence on the record to show that the bargain had been entered into by the mortgagor on account of any undue influence or that the mortgagee had taken an undue advantage of the mortgagor's weak financial position or that the transaction was in any way unconscionable. It is contended that a long term fixed in the mortgage by itself cannot amount to a clog on the equity of redemption. In support of his contention he has relied upon Ganga Dhar v. Shanker : [1959]1SCR509 , Suraj Bakhsh Singh v. Ajudhiya Singh AIR 1928 Oudh. 330, Nihal and Ors. V. Shib Sant Kumar 1919 Pun. Rec. 253, Sarfaraz Singh v. Udwat Singh AIR 1929 Oudh. 30, Sk. Abdur Rahman v. Ram Paradath AIR 1945 Oudh. 113, Aziz Shan V. Duni Chand AIR 1918 P.C. 48. Jodhiram, v. Harihar : AIR1958Pat464 , Saleh Raj v Chandanmal , and Sarjug Mahto v. Devrup Devi : AIR1963Pat114 .

8. I do not consider it necessary to make detailed reference to all the cases relied upon by the learned Counsel as, in my view, the law on the point has been settled by the pronouncement of their Lordships of the Supreme Court in Gangadhar v. Shankar Lal : [1959]1SCR509 . Their Lordships were pleased to observe:

We then have to see if there was anything unconscionable in the agreement that the mortgage would not be redeemed for 85 years. Is it oppressive? Was he forced to agree to it because of his difficulties? Now this question is essentially one of fact and has to be decided on the circumstances of each case. It would be wholly unprofitable in enquiring into this question to examine the large number of reported cases on the subject, for each turns on its own facts.

Thus it is clear from their Lordships' observation extracted above that in judging the question regarding clog on the equity of redemption it is not possible to match one case with another, and it has to be decided on the facts and circumstances of each case whether there was any thing unconscionable in the agreement. Their Lordships, however, made it clear that length of the term by itself does not lead to the conclusion that it was an oppressive term.

9. Larned Counsel for the appellant was at pains to bring out in bold relief points of similarity between the present case and the Supreme Court case referred to above to drive home his point that in similar circumstances the Supreme Court had not considered such a transaction as oppressive. In the Supreme Court case the term was 85 years. The mortgage in question had been made for Rs. 6300/- to redeem a prior mortgage of Rs. 5750/- on the same and another property was released from encumbrance. There was a term in the mortgage deed that the mortgagee could spend any amount on repairs to the mortgaged property and in putting up new constructions therein and the mortgagor could redeem after paying the expenses spent on repairs and new constructions would be paid according to the account produced by the mortgagee. There was no evidence in that case of the circumstances existing at the date of the mortgage as to the pecuniary condition of the mortgagor or as to anything else from which the Court may come to the conclusion that the mortgagee had imposed a hard bargain on the mortgagor. True it is, that most of these features exist in the present case also. But there are two additional circumstances which must be taken note of. First is, that there is a stipulation in the mortgage deed that the mortgagor would be liable to pay interest on the cost of improvements and new constructions at the rate of 12 per cent per annum and further that the mortgagor did not get any thing in cash at the time of transaction. It is clear from the mortgage deed Ex. 2 that the mortgagor was indebted to the mortgagee for the following debts:

The mortgage amount of Rs. 10,000/- was utilised for clearing of the above mentioned debts as well as for paying up another mortgage of Rs. 1029/-in respect of another property mortgaged with Shiv Narain. Thus no doubt the mortgagor had the advantage of getting one property free from encumberance, but he did not receive any thing in cash. The learned District Judge has inferred from this circumstance that the mortgagor was not in a very happy financial position. Though there is no direct evidence to that effect but the inference drawn by the learned District Judge cannot be said to be unjustified. However, what is more important, is the condition regarding payment of interest at 12 % per annum on the cost of improvements. The learned District Judge has held that the amount of interest on the cost of repairs would alone come to about Rs. 63,000/- at the stipulated rate of interest at 12 per cent per annum, if the property were to be redeemed after the expiry of the fixed term of 100 years. From this circumstance the learned Judge has inferred that the intention of the mortgagee at the time of entering into the transaction was clearly to make it almost impossible for the mortgagor to redeem the mortgage. This condition, in my opinion, tilts the scales in favour of the mortgagor.

10. The rule against clog on the equity of redemption involves that the Court has power to relieve a party from an unconscionable bargain, and if the result of the terms drawn in the mortgage is almost a complete forfeiture of the right of the mortgagor to redeem in certain circumstances, the agreement will be avoided. In the facts and circumstances of the present case, in agreement with the courts below, I have come to the conclusion that the present is not a case where the right to redeem has only been restricted. It is true that the mortgagor did not challenge the transaction for a long time, but that by itself is not conclusive and the courts should look to the cumulative effect of the circumstances attending on the execution of the mortgage deed as well as the ultimate effect on the mortgagor, if the terms are fully observed. It is beyond dispute that the contract between the parties conferred upon the mortgagee an unlimited power to make improvements and he could spend as such money as he liked, and was entitled also to charge interest on the sum expended by him at 12 per cent per annum without making any deduction for the rents and profits which may accure to him. Add to these stipulations, the fact that the interest was to run for the entire period of the mortgage. These conditions lead me to the conclusion that it was within the power of the mortgagee to make it impossible for the mortgagor to redeem the property. I am, therefore, of opinion that the learned District Judge was right in coming to the conclusion that the terms in the mortgage deed in question amounted to a clog on the equity of redemption and the suit cannot be thrown out as premature.

11. Learned Counsel for the defendants has vehemently urged that the mortgagee had not got physical possession of the property at the time of the mortgage and that it was only in view of the length of the term, that the present defendants had purchased the rights of the mortgagee. In my opinion, these circumstances do not in any way detract from the bargain being oppressive as pointed out by me above.

12. The other point argued by the learned Counsel for the defendants is that the learned District Judge ought to have granted interest at the stipulated rate of 12% per annum on the cost of improvements and new constructions and that he was in error in reducing the rate of interest to 6 percent only. It may not be out of place to mention here, that the plaintiffs have also raised a contention in their appeal that no interest should have been awarded at all on the cost of improvements as the rate of interest was excessive and the improvements have yielded rents and profits to the mortgagee which would be more than the amount of interest. The question, therefore, is whether the defendants are entitled to any interest on the cost of improvements and if so at what rate?

13. That the stipulated rate of interest is 12 per cent per annum is plain. Earned Counsel for the plaintiffs, however, urges that the rate of interest is oppressive and should be disallowed. He has placed strong reliance on Sarju Ram v. Teji Bibi : AIR1962All422 where the stipulated rate of interest on the cost of repairs was 24 percent per month. The learned Judges of the Allahabad High Court held the conditions in the mortgage deed as definitely oppressive and disallowed interest on the court of improvements altogether. On the other hand, learned Counsel for the defendants placed strong reliance on Aziz Khan v. Duni Chand AIR 1918 P.C. 48, where their Lordships allowed interest on the mortgage amount at the stipulated rate of 25 percent per annum, and even though the amount of interest piled up to a fantastic figure of Rs. 14,301/- on the principal sum of Rs. 550/-, their Lordships allowed the same. It was observed that even though the transaction was undoubtedly improvident, in the absence of any evidence to show that the money-lender had unduly taken advantage of his position, it is difficult for a Court of Justice to give relief on grounds of simple hardship.

14. In Wasu Ram v. Mohammed Ramzan AIR 1940 Lah. 199 where in a case of a mortgage with possession although no condition was inserted in the deed about crediting rents and profits to the mortgagor, this condition was held to be implied owing to the relationship of mortgagor and mortgagee between the parties. It was observed that the property is mortgaged only as a security for the mortgage debt and whatever rents and profits are received, must obviously be applied towards the mortgage deed. It was further held that if the mortgagee has incurred the cost of improvements which have yielded rents and profits, he is of course entitled to claim the cost with interest, but the interest and the rent may be taken to counter balance each other. In the present case, there is no evidence that the mortgagee had realised any rent on account of the improvements and new constructions made by him. The learned District Judge has assessed such rent or profits at 6 per cent per annum as in his view, the improvements and the new construction must have resulted in enhanced income to the mortgagee which should not ordinarily have bean less than 6 per cent per annum on the amount invested. By the term of mortgage deed the mortgagee was not liable to account for the enhanced income. There is no evidence to show as to whether the improvements and new constructions had yielded any rents or profits to the mortgagee. Then again, it must be borne in mind that the mortgagee had not got possession of the mortgaged property till it was partitioned by a decree of the Court. Taking all these circumstances into consideration it would be proper to relieve the mortgagor of the term regarding interest on the improvements to this extent only that he would be liable to pay interest on the cost of improvements at 9 percent per annum. This disposes of the defendant's appeal.

15. Coming to the plaintiff's appeal, the objection regarding payment of interest on the cost of improvements already stands disposed of as above, while dealing with the defendant's appeal, and I have held that the defendants are entitled to get interest at 9% per annum on the cost of improvements and new constructions.

16. Another point argued by the learned Counsel for the plaintiffs is that there is no condition in the mortage deed for allowing the mortagee, cost of litigation in connection with partition suit & in any case the mortagee has been awaraded costs in the partition suit from the opposite parties but the lower courts did not take this fact into consideration. It is true that in the mortgage deed there is no condition for payment of cost of partition suit which may be filed by the mortagage but it is undoubtedly mentioned in the deed that because the mortgagor has mortgaged his undivided 1/4th share in the house, the mortgagee would be entitled to get that share partitioned through the Court. It is further clear that it was impossible for the mortgagee to have possession of the morgaged property unless the same was partitioned. In these circumstances it would not be unreasonable to infer that there was an implied condition that the mortgagar would pay cost which the mortgagee may incur for getting the mortagor's share partitioned. As to the quantum of costs the courts below have accepted the accounts submitted by the mortgagee However, it is urged by the learned Counsel for the plaintiffs that the mortgagee had been awarded Rs. 1103/7- as costs from the defendants in the partition suit in the trial court vide decree sheet Ex. A. 2. No decree sheet of the appellate court in the partition suit has been filed and consequently it is not known as to whether the mortgagee had been awarded any costs from the opposite parties in appeal. There is nothing on the record to show whether the mortgagee has realised the cost awarded to him by the trial court, but in the absence of anything to the contrary, it must be presumed that he must have realised it. Earned Counsel for the defendants, however, urges that the appellate court may have kept the costs of both the courts easy. There is, however, nothing to support that assertion. In the circumstances it would be just and reasonable to deduct the amount of Rs. 1103/7/- from Rs. 4000/- allowed by the learned District Judge.

17. The last point urged by the learned Counsel for the plaintiffs is that the courts below should not have awarded Rs. 777/8/- as costs of the trial court to the contesting defendants. It may be observed that the plaintiffs had not admitted the costs of improvements made by the defendants. In these circumstances the courts below cannot be said to have committed any error in the exercise of their discretion in awarding the aforesaid costs of the trial court to the defendants.

18. The net result is that I allow both the appeals in part, and modify the judgment and decree by the learned District Judge under appeal to this extent that the defendants will he awarded interest on the cost of improvements Rs. 7901/5/6 at the rate of 9% per annum and further that the cost of partition suit Rs. 4000/- awarded by the learned District Judge be reduced by Rs. 1103/7. The rest of the decree is maintained. The exact amount of the items varied by me may be entered in the decree by the office after calculation. In the circumstances of the case, both the parties are left to bear their own costs.

19. Learned Counsel for the defendants prays for leave to appeal to Division Bench. However, I do not consider it fit case for grant of leave. The prayer is disallowed.